Why 2024 was a transformational year for UK M&A

A record-breaking wave of M&A has reshaped the UK insurance market over the past year, with the broking and insurer sectors undergoing significant consolidation to alter market dynamics.

According to January 2025 figures published by professional services firm Ernst and Young (EY), the number of UK insurance deals rose from 112 in 2023 to 188 in 2024, with the total publicly disclosed deal value increasing from £3.7bn to £4.6bn between 2023 and 2024.

One of the biggest M&A stories of 2024 was Aviva’s agreement to acquire Direct Line Group (DLG) for £3.6bn in December.

Already the UK’s largest insurer due to gross written premium (GWP) of almost £6.7bn, according to Insurance DataLab’s analysis of insurers’ latest Solvency and Financial Condition Reports (SFCRs), Aviva’s acquisition of DLG – adding a further £3.9bn in GWP – is set to push the combined business past the £10bn mark. This is a milestone for a UK-based insurer.

And, with DLG reporting an expense ratio above the market aggregate for a UK-regulated insurer in each of the last four years, Aviva will be hoping to make some efficiency savings that can help propel its newly acquired business back into profitable underwriting territory after two years of heavy losses.

UK Insurance, the legal entity underwriting DLG’s business, reported a combined operating ratio (COR) of 121.6% for 2023/24, the latest period for which SFCRs are available, up from 112% for the prior year. Aviva’s main underwriting business, meanwhile, reported a profitable COR of 98.5% in its latest SFCR.

Directional deals

Aviva’s deal to buy DLG at the end of 2024 followed other significant transactions in the insurer market last year.

For example, RSA acquired commercial lines specialists NIG and FarmWeb from DLG in a deal worth more than £520m – the transaction was first announced in September 2023 and completed in May 2024.

Meanwhile, Admiral purchased RSA’s direct home and pet personal lines business in April as RSA redefined its core strategy to focus purely on commercial lines business.

With these major insurer transactions shaping the market, speculation continues about further insurer consolidation in 2025.

Persistent industry rumours, for example, suggest that Boston-based private investment firm Bain Capital may be looking to sell Esure, with personal lines specialist Ageas emerging as a potential buyer following its unsuccessful bids for DLG in Q1 2024.

Big broker buys

The largest broking deal of last year, meanwhile, was the £1.2bn megamerger between Markerstudy and The Ardonagh Group-owned Atlanta, which completed in June 2024. This newly combined entity now controls more than £3bn of GWP, with a customer base approaching one million policyholders.

However, Insurance DataLab’s analysis of M&A activity across the UK broking market revealed that Seventeen Group was one of the most acquisitive brokers in 2024, expanding its footprint through deals such as its purchases of Keith Miller Insurance Services in March and North West Risk Solutions in June.

When it comes to geographical focus, London and the south east continue to dominate in terms of M&A activity – but the north west has become an increasingly important market for M&A, accounting for more than 10% of all broker transactions in 2024.

Data published by consultancy MarshBerry in January 2025 confirmed a total of 152 M&A transactions in the UK intermediary arena in 2024, making it a record year after a busy final quarter in 2024 – although this amount is still only one more deal than was completed in 2023.

Writing in the firm’s December 2024 UK insurance M&A market update, MarshBerry’s UK managing director, John Nisbet, revealed that the number of deals completed in 2024 was “substantially higher than the long-term average”, despite only 10 deals completing in December.

This was more than offset, however, by the “race” to beat the increase in the main rate of capital gains tax – which rose from 10% to 20% last October – which led to 41 transactions across Q4 2024, making it the second busiest quarter on record.

New year, new trend?

The same cannot be said for the start of 2025, however, with Nisbet revealing in MarshBerry’s January update, published in February 2025, that “the year is off to a slow start” with only three deals completing over the course of January – the lowest monthly figure since 2017.

One possible reason for this slowdown could be delays in FCA approvals.

Nisbet noted that deals in the UK require authorisation from the FCA before they can be completed and that he had seen “some anecdotal evidence from transactions MarshBerry is currently advising on that the timing for such approvals might have slowed down a bit recently”.

While the UK has seen record levels of consolidation in the insurance sector, Europe is quickly catching up.

The latest EY figures, published in January 2025, revealed a sharp rise in M&A activity across the continent, amounting to 333 transactions in 2024. This is up from 241 deals in 2023 – an increase of 38% year-on-year.

EY additionally confirmed that total publicly disclosed deal values across these transactions increased from €9.8bn (£8.2bn) to €13.2bn (£11bn) over the same reporting period.

This surge in deal activity suggests that European insurance markets are entering a new phase of consolidation, mirroring the trends seen in the UK over recent years.

This includes the uptick in deals involving UK-based brokers that have set their eyes on an overseas expansion, including the likes of Howden and Brown and Brown, who have invested heavily in businesses in Continental Europe.

This is likely to become an increasingly common trend throughout 2025, with the pool of attractive mid-market UK brokers continuing to shrink after years of heavy consolidation, meaning that there are now fewer that are available for acquisition.

Indeed, MarshBerry’s aforementioned December update stated that “the average size of acquired targets in commercial broking has continued to trend downwards” and that “there were more sub-£5m transactions in 2024 than in any other year”.

With Continental Europe yet to experience the same level of consolidation as has already been seen in the UK, the territory is likely to become a fruitful hunting ground for consolidators that have their eye on securing further growth opportunities.

Falling interest rates are also likely to lead to an increase in the number of broking firms refinancing their debt facilities over the course of 2025, which could secure additional capital for M&A activity – whether in the UK or abroad.

Attractive acquisitional growth

Insurance DataLab co-founder Dan King said these deals could be of fundamental importance for the UK general insurance industry over the coming months.

“With borrowing costs easing, we could see a fresh wave of activity as brokers look to refinance existing debt and unlock capital for expansion,” he explained.

“For many, this could mean strengthening their existing position in the UK market, but for others, it will present an opportunity to push into new territories and take advantage of M&A opportunities across Continental Europe.

“Debt levels remain high for many brokers and the softening market is likely to apply the brakes, at least partially, on the high levels of organic growth we have seen in recent years.

“The consolidators will still need to deliver growth, both to satisfy private equity backers and to continue to service their debt obligations – even at lower rates of interest – and hitting the acquisition trail is certainly one way they will be looking to deliver that.”

Whatever happens, one thing is certain – the M&A wave shows no sign of ending and consolidation will remain a defining force in 2025.